Asked by Maria del Mar Ribas on Jul 16, 2024
Verified
Which one of the following statements is correct concerning option values?
A) The value of a call increases as the time to expiration decreases.
B) The value of a call increases when the strike price increases.
C) The value of a put is greater if it is a European put rather than an American put.
D) The value of a March 30 put on a stock tends to move inversely to the value of the March 30 call on the same stock.
E) The value of a put increases as the strike price decreases.
Option Values
The premium or price of an options contract, determined by factors including the underlying asset's price, strike price, and expiration date.
European Put
A type of put option that can only be exercised at its expiration date, not before.
American Put
An option contract giving the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price before or on a specified date.
- Comprehend how attributes such as expiration period and interest rate influence the value of an option.
Verified Answer
AT
Amelia TillmannJul 18, 2024
Final Answer :
D
Explanation :
The value of a put option tends to move inversely to the value of a call option on the same stock with the same strike price and expiration date because as the stock price decreases, the put option becomes more valuable while the call option becomes less valuable, and vice versa.
Learning Objectives
- Comprehend how attributes such as expiration period and interest rate influence the value of an option.